When a company enters administration, who controls the sale of charged property - secured creditor or administrator?
A recent High Court decision in Milltom Builders Ltd v Waterfield Developments Blackburn Ltd and another [2025] EWHC 2159 (Ch), considered whether a secured creditor could enforce its security or whether an administrator should have conduct of the sale and use the proceeds in the administration of the insolvent company, Waterfield Developments Blackburn Ltd (the Company).
In early 2023, Milltom Builders Limited (Milltom) obtained and registered interim and final charging orders over Waterfield Mill (the Property) owned by the Company.
In July 2023, the Company granted a charge over the Property to Supahome By Maple Limited (Supahome). Subsequently, Supahome took an assignment of a separate charge granted to a third party over the Property which was registered just after Milltom's interim charging order.
In August 2023, Milltom applied for an order for sale to enforce its security (the Order for Sale Proceedings). In April 2024, before the Order for Sale Proceedings could be heard, Supahome as a qualifying floating charge holder, appointed an administrator of the Company (the Administrator). The appointment of the Administrator automatically suspended the Order for Sale Proceedings under the administration moratorium.
In June 2025, Milltom applied to court for permission to continue its Order for Sale Proceedings despite the moratorium (pursuant to paragraph 43 of Schedule B1 of the Insolvency Act 1986 (IA 1986)).
In July 2025, the Administrator applied for an order that he should have conduct of the sale, free of security and the right to distribute the proceeds as he considered appropriate (relying on paragraph 71 of Schedule B1 to the IA 1986).
Key Issues
The key issues before the Court where:
- Which charge had priority?
- Who ought to sell the Property?
There was clearly distrust between the parties. Milltom had been involved in previous sales of charged property belonging to the Company. For those sales, Milltom had appointed a receiver (who subsequently had his insolvency practitioner licence withdrawn) and there were doubts as to whether the sales had achieved market value. One of the properties was sold to Milltom itself without a proper marketing process.
Milltom, on the other hand, was concerned that the same lawyers had been instructed by the Company and the Administrator and the Administrator's progress report had ranked Supahome ahead of Milltom in the distribution of sale proceeds and had only placed a value of £1 on Milltom's debt.
Milltom relied on Re UK Housing Alliance (North West) Limited [2013] EWHC 2553 (ch) (Re UK Housing Alliance), arguing that an administration should not disadvantage secured creditors who held security before the administration began.
The Court differentiated Re UK Housing Alliance as it involved a property where only one creditor stood to benefit from the sale. In contrast, both Milltom and Supahome would benefit here, establishing a “wider interest for the purposes of the administration in the realisation of the property other than that of the interests solely of Milltom”.
The Court's Decision
Priority
The Court confirmed Milltom’s first charge took priority because it was registered before Supahome’s. However, as Supahome was not a party to this application, it could still challenge this in future proceedings.
Control of the sale
The Court ordered the Administrator should have conduct of the sale. Key reasons included:
- Independence. The Court felt that giving Milltom and potentially his preferred receiver conduct of the sale would be a risk given the history.
- Regulatory safeguards. As an officer of the Court, the Administrator is bound by statutory duties under the IA 1986. He must sell the Property for market value and apply the correct priority of charges when distributing proceeds. This provides greater oversight than if Milltom managed the sale.
- Timing. Allowing the Administrator to sell avoided delays from listing the Order for Sale Proceedings for a final hearing, making the process faster and more effective.
Cases like this will turn on their own facts. However, this case does broadly highlight that administrators may be entitled to take control of a sale even when a secured creditor is already enforcing its security. The case is also another reminder of the importance of registering a charge as soon as possible to avoid losing priority of security.
